DMCC Act: investigating and monitoring digital markets

The DMCC Act introduces a digital markets competition regime giving the CMA a range of new powers in relation to firms with significant market status (SMS). We have discussed in our previous articles in this Spotlight series how firms will be designated as having SMS, and what new rules will apply to these firms. In this article we explore the CMA's investigatory and monitoring powers when carrying out its digital markets functions. 

Investigatory powers 

The DMCC Act provides the CMA with a range of investigatory powers which it may use when administering and enforcing the digital markets competition regime including the power to require information, the power of access, the power to interview, and the power of entry (both with and without a warrant). The CMA's draft guidance (subject to consultation) provides detailed guidance on each of these powers, but the following points are of particular interest: 

• Algorithms and data: The CMA's power to require information goes beyond the standard request for documents and may also cover data, code, algorithms, estimates, forecasts, returns, explanations, or information in any other form. This can include information as to how algorithmic code has changed over time, including through version control. Companies subject to the DMCC may need to consider whether their internal processes are sufficient to enable them to provide the sorts of information that may foreseeably be required. 
• Demonstrations and tests: The CMA can also require a party to carry out demonstrations or tests, vary their usual conduct in relation to some or all users or otherwise "obtain or generate information". This sort of requirement could well be onerous with no clear limitations on the CMA’s powers in its draft guidance, although it does indicate that it will take account of the value, feasibility and proportionality of such tests before making requests.  
• Skilled persons reports: The CMA also has the power to require a skilled person to report to it on a matter relevant to the operation of the regime (similar to the FCA's existing powers for 'skilled persons reviews'). These skilled persons could be external third parties such as an accounting firm, management consultancy or an individual with technical expertise such as a software engineer. The CMA has indicated that its usual approach will be to ask the SMS firm to appoint the skilled person (subject to approval from the CMA) and to provide the individual with any assistance that may be reasonably required. 

In relation to any information request, the CMA may require a firm to name a senior manager who is responsible for ensuring compliance (usually a senior executive or executive Board member). Notably, where the CMA considers that the senior manager has failed, without reasonable excuse, to prevent certain failures or actions of the firm (i.e. for non-compliance with the information request or the provision of false or misleading information), the CMA has the power to impose a penalty on the individual, as well as on the firm itself. 

The CMA's powers of investigation can be used to obtain information from competitors, customers, complainants and suppliers, as well as the SMS firms or potential SMS firms themselves. The CMA acknowledges that requests are likely to be much more onerous for smaller firms or consumer organisations, and we expect that will be reflected in the CMA’s exercise of its powers in practice.  

Finally, the DMCC Act specifies the extra-territorial effect of the CMA's investigatory powers for the digital markets regime (perhaps to avoid the type of debate that arose in CMA v Volkswagen & BMW - see our earlier post here). The CMA will have the power to issue information notices to those outside of the UK if they fall within one of the criteria specified in the Act (for example, a firm that is the subject of a digital markets investigation, or a firm that carries on business in the UK). The CMA's other powers will be limited to entities in the UK (e.g. to access, to interview or to enter premises), although the CMA's guidance makes clear that this does not prevent it from exercising its powers against UK entities in relation to information stored outside of the UK (e.g. information accessible on a remote server).  

Monitoring   

The CMA’s role in overseeing the digital markets competition regime will also involve actively monitoring: (i) SMS firms’ compliance with competition requirements; (ii) the effectiveness of competition requirements; and (iii) whether to vary or revoke competition requirements. The CMA has indicated that it will gather information from a range of sources for monitoring purposes, including its own horizon scanning and market intelligence, as well as relying on third party complaints and whistleblowers (particularly employees and former employees of SMS firms).   

As part of the monitoring efforts, the DMCC Act also requires an SMS firm to appoint a nominated officer in respect to each of its conduct or pro-competition requirements. That officer must: (i) monitor the SMS firm’s compliance; (ii) cooperate with the CMA for the purposes of ensuring compliance; and (iii) ensure the SMS firm prepares the necessary compliance reports. The CMA has indicated that this person is likely to need to be a senior manager with operational responsibility for the SMS firm’s business model, product design and/or strategy in relation to the relevant digital activity.  

The detailed guidance from the CMA on its plans to investigate and monitor the new digital markets competition regime shows its clear intention to be able to effectively put into action the new rules for big tech firms. The inclusion of powers to require tests or demonstrations and reports from skilled persons shows a drive to obtain an in depth understanding of the issues that arise in digital markets and how they may be remedied. No doubt the CMA will be keen to avoid lengthy appeals on procedural issues (such as the one in CMA v Volkswagen & BMW) which may slow down the impact of the new regime and reduce the CMA's bandwidth to deal with these substantive issues. It remains to be seen how these new powers will work in practice, as the CMA starts its first SMS investigations (we expect) later this year.